Hungary cohesion fund freeze unlikely, says City

Hungary is unlikely to see its EU cohesion fund disbursements suspended, London-based emerging markets analysts said on Wednesday.

In its daily emerging markets update released to investors in London, JP Morgan said that the actual suspension is "far from being a done deal and, in our view, is still unlikely".

"We think the government will be given until end-2012 to reverse the ruling by announcing further fiscal measures ... Such measures are likely to be part of the conditionality for an IMF/EU deal, which we expect to be concluded in May-June".

The European Commission should only accept a financing deal for Hungary if the fiscal targets set in the program were consistent with an exit from the Excessive Deficit Procedure. Thus, "we believe the EU will use the threat of suspension as leverage in upcoming negotiations, but will ultimately not apply the sanction", JP Morgan's analysts said.

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